Brent crude surged above $98 a barrel on Thursday as a widening military conflict between the United States and Iran choked off access to critical energy shipping routes, threatening to accelerate inflation and push costs onto consumers and businesses worldwide. The Iran-aligned Houthis struck two Saudi oil tankers as part of a naval blockade on Saudi Arabia, creating a second chokepoint on global oil supplies alongside Iran's near-closure of the Strait of Hormuz. Normally a fifth of all oil and natural gas traded passes through the narrow strait.
The U.S. military announced Wednesday that it was conducting a 12th night of strikes against Iran as both sides increasingly targeted civilian infrastructure. The escalation follows President Donald Trump's direction to carry out a new round of strikes on Iran, marking 12 successive nights of American attacks and prompting further Iranian retaliation. Continued fighting was preventing oil tankers from using the Strait of Hormuz to exit the Persian Gulf.
Energy Prices Threaten Economic Recovery
Brent crude jumped 4.3% to $98.16, its highest level since early June, while the U.S. benchmark crude gained 3.6% to $89.91 a barrel. Rising oil prices were weighing on stocks because they raise costs for most businesses and can dent consumer spending. Higher oil prices were threatening a reacceleration of inflation that could push the Federal Reserve and other central banks to raise interest rates.
The rise in oil pushed Germany's 10-year bund yield above 3.2% for the first time since the euro zone debt crisis in 2011 and sharpened focus on the European Central Bank meeting later in the day. Societe Generale FX strategist Kit Juckes said, "The consensus view blames a timid BOJ (for the recent yen fall), but I think the problem is that higher oil prices have dashed hopes of 1.5% GDP growth this year."
Tech Stocks Defy Broader Pressures
Asian shares rose despite the energy crisis as investors kept buying stocks tied to artificial intelligence. The MSCI Asia-Pacific index ex-Japan rose about 1%, South Korea's KOSPI gained 4.4% to 7,096.89, and Japan's Nikkei 225 rose 0.5% to 66,422.60. Hong Kong's Hang Seng climbed 1.3% to 25,210.81, the Shanghai Composite added 0.3% to 3,876.78, and Australia's S&P/ASX 200 gained 0.2% to 8,839.00. India's Sensex fell 0.6%.
SK Hynix and Samsung Electronics led the KOSPI higher, with Samsung up 3.7% and memory chipmaker SK Hynix up 4.9%. In Tokyo, technology companies led gains, with SoftBank Group climbing 3.8%. The gains reflected confidence that the artificial intelligence capital-expenditure cycle was still intact, with stronger cloud growth helping validate heavy spending on AI infrastructure.
Charu Chanana, chief investment strategist at Saxo in Singapore, said, "U.S. megacaps may face more scrutiny because they are writing the cheques, while chipmakers, memory suppliers and infrastructure companies get paid earlier in the investment cycle." Alphabet and Tesla earnings on Wall Street showed no sign of a slowdown in spending on AI infrastructure, and Google-parent Alphabet had sharply raised its capital expenditure plans for the year.
Currency Markets React to Energy Shock
The U.S. dollar was trading at 163.36 yen as the Japanese currency wavered near its lowest level in 40 years. Expectations the gap between U.S. and Japanese interest rates would widen because of higher inflation in the U.S. had helped push the dollar higher against the yen. Japan's BOJ-sensitive 2-year government bond yield hit a 31-year high in Tokyo on faster rate-hike bets, and Japan's finance minister issued verbal warnings about possible intervention, saying the government was ready to take decisive forex action as needed.
The euro rose toward a one-week high at $1.1429 as traders positioned for the ECB meeting, while the Japanese yen was back at a 40-year low versus the dollar after a brief lift faded. The euro was unchanged at $1.1414 in other dealings early Thursday.
Why This Matters:
The surge in oil prices threatens to derail economic recovery efforts and place the heaviest burden on working families already struggling with the cost of living. Higher energy costs ripple through every sector of the economy, raising prices for transportation, heating, and manufactured goods while squeezing household budgets. The conflict's disruption of global energy supplies exposes the vulnerability of economies dependent on fossil fuels and underscores the urgent need for investment in renewable energy infrastructure and energy security. If central banks respond to oil-driven inflation with interest rate hikes, borrowing costs for homes, education, and small businesses will climb, potentially tipping economies into recession. The concentration of AI investment gains among a handful of tech giants, even as energy shocks threaten broader prosperity, highlights growing inequality in who benefits from economic growth and who bears its costs.